Navin Fluorine Q4 Results Review - Strong Performance Led By Specialty, HPP Businesses: Motilal Oswal

Motilal Oswal Report

Navin Fluorine International Ltd.’s Ebitda/profit after tax grew 13%/42% YoY in Q4 FY24, higher than our estimates. The beat was driven by a strong performance in the specialty chemicals business, which was well supported by growth in the high-performance product segment. Gross margin was 50%, while Ebitda margin dipped 10.7pp YoY to 18.3%.

The specialty chemicals business posted strong revenue growth of 26% YoY, led by higher utilisation at the Surat plant and the addition of new molecules (one in Dahej and two in Surat). Management highlighted that it is much better placed with long term take-or-pay contracts with its customers. Currently, 80% of the revenue is contributed by the agrochemicals sector. Navin Fluorine anticipates launching three-four new molecules every year in this space.

The HPP business grew 3% YoY, led by R22 and R32 plants that are running at full capacity, with positive pricing trends being seen in the domestic market for R32. Management seeks to double the R32 capacity that is expected to be commissioned by Feb-25. The HFO plant has stabilized, and the volumes are higher than the previous three quarters. Management also highlighted that the Ref Gas market is showing signs of recovery.

Navin Molecular continued its weak performance with a revenue decline of 76% YoY in Q4, and some deferral in molecules while some molecules did not get timely approvals by the customers. Despite this, management mentioned that it has a strong late-stage pipeline/commercial opportunities in the business. The BoD has also approved a capex of Rs 2.9 billion for its cGMP-4 plant with Phase-1 outlay of Rs 1.6 billion that is likely to be commissioned by end-CY25.

We have not made any material changes to our estimates as of now. Subsequently, we expect a revenue/Ebitda/profit after tax compound annual growth rate of 23%/34%/39% over FY24-26. The stock is trading at 38 times FY26E EPS of Rs 89 and 25 times FY26E EV/Ebitda.

We value the company at 35 times FY26E EPS to arrive at our target price of Rs 3,110. We reiterate our Neutral rating on the stock.

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